In order to support economic stability in Turkey, protect financial markets and increase confidence in the Turkish Lira, certain restrictions have been imposed on the conclusion of contracts denominated in foreign currency or indexed to foreign currency. These restrictions are regulated in detail under the Law No. 1567 on the Protection of the Value of Turkish Currency and Presidential Decree No. 85 dated September 13, 2018. These regulations had a significant impact especially on the real sector and interfered to a certain extent with the principle of freedom of contract.

1. Scope of the Prohibition

Pursuant to Communiqué No. 11990, it is strictly prohibited to determine the price in foreign currency or indexed to foreign currency in certain contracts concluded between Turkish residents. The types of contracts covered by the prohibition are as follows:

• Contracts for the purchase, sale and lease of immovable property: Contracts for the purchase, lease or transfer of immovable property are covered.
• Contracts for the purchase, sale and lease of vehicles: Purchase, sale and lease contracts for all types of vehicles, including motor vehicles, are also subject to the prohibition.
• Employment contracts: Covers wages, bonuses and all similar financial rights of employees.
• Service contracts: Includes contracts for the provision of services such as consultancy, training, technical support.
• Contracts of work: Agreements for the creation or production of something are also subject to this regulation.

This prohibition is applied by looking at the content of the contract, irrespective of its name.

2. Exceptions

In certain circumstances specified in the Communiqué, it is possible to conclude contracts in foreign currency or indexed to foreign currency. These exceptional circumstances are as follows:

• Contracts related to export, import and transit trade transactions: Transactions made within the scope of international trade activities. Foreign currency earning transactions.
• Contractswith non-residents: Foreign currency may be used in contracts concluded with non-residents, regardless of whether they are natural or legal persons.
• Specific contracts with public institutions and organizations: May be within the scope of strategically important projects. In strategic areas such as defense industry, infrastructure projects.
• Contracts with international financial institutions: Agreements with organizations that provide financing are within this scope. Financial agreements with organizations such as the World Bank and IMF.
• Certain contracts of companies with foreign currency income: Companies whose activities generate income in foreign currency may use foreign currency in certain contracts. Companies that generate a significant portion of their income in foreign currency.

The Ministry of Treasury and Finance also, define new exception categories by assessing special circumstances.

3. Implementation Process

Existing Contracts

Contracts signed before the publication of the Communiqué and which contain a price in foreign currency or indexed to foreign currency must be reviewed by the parties and the price must be re-determined in Turkish Lira. If a dispute arises between the parties in this regard, a solution will be sought within the framework of the general rules of law.

New Contracts

After September 13, 2018, new contracts must only be concluded in Turkish Lira in areas covered by the prohibition. Otherwise, the contract may be deemed legally invalid and the parties may face sanctions.

4. Audit and Sanctions

Audit Authority

The main institution responsible for the implementation of the Communiqué is the Ministry of Treasury and Finance. However, when deemed necessary, relevant professional chambers, tax offices and other public institutions may also carry out audit activities.

Sanctions to be applied

• Invalidity: Contracts concluded in violation of the prohibition may be deemed invalid in the legal order.
• Fines Law No. 1567 imposes administrative fines.
• Regulatory Actions: If necessary, additional obligations may be imposed on the contracting parties by the relevant institutions.
• Enforcement Processes: By intervening in the relevant contracts, obligations such as readjustment or termination of the contract can be imposed on the parties.

5. Frequently Asked Questions (FAQ)

Who is a “Resident” in Turkey?

The definition of “resident” is critical to understand who is covered by the ban. For more information, please see our article Who is a Resident in Turkey?

Can I Sign a Lease Agreement in Foreign Currency?

Lease agreements cannot be concluded in foreign currency for residential or workplace leases between residents in Turkey. However, it is possible if it is made with a person residing abroad.

Is it possible to conclude a lease agreement in Turkish Lira indexed to foreign currency?

No. It is also prohibited to determine the rental price indexed to foreign currency in the housing and roofed workplace lease agreements to be concluded between residents in Turkey. In this context, the rental price must be determined in Turkish Lira and there must not be any exchange rate or indexation to foreign currency.

Lease Agreements on Precious Metals and Commodities such as Gold and Silver: Are They Covered by the Prohibition on Contracts in Foreign Currency?

Yes. According to the Ministry of Treasury and Finance, in accordance with Decree No. 32, it is prohibited for Turkish residents to agree on the contract price and other payment obligations arising from certain contracts to be concluded between themselves in foreign currency or indexed to foreign currency. This regulation, It also includes contracts on precious metals and commodities whose prices are determined in foreign currency in international markets.

In this context, lease agreements based on precious metals such as gold and silver are also subject to the prohibition of contracting in foreign currency. The validity of such contracts is evaluated according to the residency status of the parties and the subject matter of the contract.

Which Documents are Required for Exemptions?

In order to document that you have earned foreign currency income or that you are within the scope of the exemption, you must submit the documents requested by the relevant institutions (invoices, income documents, etc.).

Conclusion

The ban on contracting in foreign currency and the related exemptions are intended to protect the Turkish economy from external shocks, strengthen financial stability and increase the demand for the Turkish Lira. Proper understanding and implementation of these rules is of great importance for both personal and commercial transaction security.

Related Legislation:

• Law No. 1567 on the Protection of the Value of Turkish Currency
• Decree No. 32 on the Protection of the Value of the Turkish Currency
• Presidential Decree No. 85
• Communiqué No. 11990
• Who is considered a resident in Turkey?

Note: This article has been prepared for general information purposes. For your specific transactions, it is strongly recommended that you seek professional advice from a specialized legal expert.

Stay Secure in Your Contract Processes with MFY Legal

Compliance with the regulations under the ban on foreign currency contracts is critical not only to fulfill legal obligations but also to hedge financial risks.

As MFY LEGAL, we offer our clients services in this field:

• Contract design and revision in compliance with the foreign exchange ban
• Legal compliance analysis of existing contracts
• Determination of residency status and exemption conditions
• Consultancy in foreign currency income declaration processes
• Litigation and mediation support in case of dispute
• Risk management consultancy in commercial contracts

📝 To summarize:

Organizing your contracts in the wrong currency can put you at risk of both invalidity and severe sanctions. Manage the entire process correctly and safely with professional support.

✅ MFY LEGAL expert staff is at your side!

📞 Contact us now :

📧 [email protected]

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